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EGP / USD CBE market average: Buy 15.57 | Sell 16.31
EGP / USD at CIB: Buy 15.00 | Sell 15.95
EGP / USD at NBE: Buy 15.35 | Sell 15.75

EGX30 (Sunday): 10,916.97 (+2.14%)
Turnover: EGP 1.964 bn mn (351% above the 90-day average)
EGX 30 year-to-date: +55.82%

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PHAROS VIEW

IMF Approves Egypt’s Loan: Rejoice for today, Hard-work for tomorrow

The IMF board approved on Friday the long-awaited USD 12 bn support programme for Egypt; net international reserves are expected to reach c. USD 26 bn before year end, which would be enough to cover 5.6 months of imports. The programme targets reducing primary expenditure by 3.5% of GDP through subsidy cuts and public wage growth control. Meanwhile, the IMF reassured that social programs are projected to gain around 1% of GDP out of the achieved fiscal savings. Consequently, the public debt is expected to decline by 10% of GDP by the end of the three-year program.

We believe that such a positive vote of confidence and with the upcoming influx of foreign aid noted above will ease the current obsession about the EGP/USD intraday and daily fluctuations. However, while the IMF ‘seal of approval’ will help Egypt unlock much needed foreign inflows, it is still within the hands of the government to revive the country’s economy. The exchange rate is a reflection of the country’s macroeconomic stature. In that context, we advise our clients to keep an eye on near-future developments with regards to the budget deficit, the new investment law and the ease of doing business tourism revival, and export incentivizing schemes. Our argument stands on the fact that steering the economy to stability depends on the efforts of the finance, investment, tourism and industry ministries, then the exchange rate will follow. Tap here to read the full research note.

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